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The week ahead: US, SNB rate decisions; FedEx, Ocado results

06-5-2020 10:13:0206-5-2020 10:08:31Watch our week ahead video preview, read our pick of the top stories to look out for this week (16-20 March), and view our key company earnings schedule.

In this week's video, UK chief market analyst, Michael Hewson, looks back at the record-breaking week for stock markets, as well as towards the US Federal Reserve, Swiss National Bank and Bank of Japan interest-rate meetings. Michael also takes a look at some of the key levels on the S&P 500, DAX, FTSE 100, EUR/USD and GBP/USD.

China retail sales (Feb)  

Monday: With the latest China purchasing manager indices (PMIs) showing huge drops in February, and the trade data recording a significant decline in exports, the potential for an ugly retail sales number is high. Most of China was locked down for the majority of March, and with the Chinese consumer now making up more than 50% of the Chinese economy, a nasty number this week could give an early insight into the potential global impact as coronavirus shutdowns, self-isolations and quarantines start to bite in Europe and the UK.

Ferguson half-year results

Tuesday: Plumbing and heating provider, Ferguson, had a reasonably decent first quarter, with revenue up 5.3% to $5.21bn. The US business provided $4.89bn worth of revenue, though the UK continued to underperform. Its UK business revenue fell 2.2% to $541m, while trading profit dropped to $15m from $19m. The demerger of the two businesses remained on track. However, given recent stock market volatility, management might decide to delay the split, which would put the UK company into the FTSE 250, with an estimated value of £600m. This week’s half-year numbers could reinforce the diverging fortunes of the two businesses, particularly since the UK had a relatively weak end to 2019.

UK unemployment & earnings (Jan)

Tuesday: After last week’s 50 basis-point emergency rate cut from the Bank of England, this could be the high watermark for unemployment and earnings levels, as the ripple effect of coronavirus heads our way and infects global markets. So far, we’ve seen little sign of economic weakness in the these numbers, which is welcome at a time when wage growth has continued at over 3%, and unemployment is still close to 40-year lows. Consumers do appear to have cut back, as evidenced by a slowdown in retail sales, but even here we’ve started to see a modest rebound, after a weak end to 2019. This week’s figures look set to show that the UK economy has stayed resilient. However, they do have a significant lag, and won’t reflect the recent flooding and coronavirus outbreaks.

German ZEW economic sentiment index (Mar)

Tuesday: At the end of last year, German investor sentiment underwent a sharp improvement after months of being in negative territory, on hopes that the growth in recent PMI data was symptomatic of a broader recovery in the German economy. This led to the DAX hitting a record high in February. Since then, the equity market rally has come unstuck spectacularly. These sharp declines are likely to be reflected in the latest investor sentiment data, which will probably result in further reductions after the index hit a four-and-a-half-year high of 26.7 in January. This could lead to the index slipping back into negative territory again, as investors consider whether it’s safe to get back into the market.

FedEx Q3 results

Tuesday: The number of packages and freight that a logistics and parcel company transports, nationally and internationally, is a reliable indicator of economic activity and confidence. In its last quarter, FedEx cut its guidance for the second time in three months, warning that a weaker global economy, higher costs, and the loss of its Amazon contract, was likely to see it miss its targets. The company not only flopped in its Q2 numbers, but also warned that its upcoming Q3 numbers were anticipated to come in short, as it announced slowdowns in hiring and cuts to freight flights due to lower demand. Profit is expected to come in at $1.61 a share.

US Federal Reserve interest-rate decision

Wednesday: The US central bank caught markets on the hop earlier this month, after unexpectedly slashing rates by 50 basis-points in response to concerns over tighter monetary conditions in the US economy, and a global slowdown due to the coronavirus outbreak. It was a remarkably quick change of tone from a central bank, whose officials had been unusually sanguine about the risks posed by the virus. This abrupt change of stance initially prompted a modest rally higher. However, the net effect spooked investors, to the extent that markets soon fell sharply. This week the Federal Reserve is expected to do more, and while the US central bank may cut rates again, it’s hard to see what effect more rate cuts might have, given that it causes a shock in both supply and demand. Fed chair, Jerome Powell, is likely to face tough questions over what other measures it can take in respect to protecting financial stability in the aftermath of the recent problems in US treasury markets.

Bank of Japan & Swiss National Bank interest-rate decisions

Thursday: An unexpected side effect of the recent volatility in both the Japanese yen and Swiss franc, despite both central banks having rates in negative territory, has resulted in significant gains in their respective currencies. With the central banks at the limit of their abilities to influence their currencies, it will be interesting to see if they even try to mitigate recent advances. We’ll find out on Thursday what other measures these two banks can reasonably take, not only to support their economies, but also to ease financial conditions.

Ocado Q1 results

Thursday: Is Ocado a retailer or a technology solutions provider? It certainly doesn’t trade like a retailer, and investors don’t treat it as such, given that it has yet to make a profit. It’s had its problems over the last couple of years, including fires at two of its distribution warehouses, which hit output early last year. Last July, management put the cost of the fires at more than £100m. This setback hasn’t stopped the company from ramping up its growth plans, and its joint venture with Marks & Spencer prompted retail revenue to rise by 10.8% to £429.1m at the end of the last quarter. Average orders per week also increased, from 317,000 a year ago to 350,000, a rise of 10.4%. Last month, the company said it expected to grow retail revenue for the upcoming year by 10% to 15%, despite posting a loss of £214.5m last year due to higher costs as a result of the Andover fire.

Darden Restaurants Q3 results

Thursday: It could be a tough year for companies like Darden, which owns a number of the most recognisable brands in the US, including Olive Garden and LongHorn Steakhouse. At its most recent earnings update, the company reported an 8% rise in operating income to $160.2m from the year before, and an increase in profit in Q2 to 92c a share. In the report, the company outlined its outlook for fiscal 2020, with an expectation of an earnings per share range of $6.30 to $6.45. In the face of concerns about a slowdown in consumer spending as coronavirus cases in the US rise, the shares have slid sharply since mid-February, as investors start to price in a hefty downgrade if consumers stay at home.

JD Wetherspoon half-year results

Friday: While the traditional British pub has been struggling, JD Wetherspoon, owned by its irrepressible chairman, Tim Martin, has managed to set itself apart with some decent outperformance. That doesn’t mean it isn’t finding life difficult, but it’s adapting to higher costs better than most. Last September, the company’s sales rose by over 7%, even though profit fell 4.5% to £102.5m last year. Mr Martin was bullish about the future, predicting that the pub chain would do well over the next few months, irrespective of the Brexit outcome. He was confident about future sales, pledging to keep prices low heading into 2020, despite spending more on refurbishing its pubs’ real estate. For all of his bullishness, the pub chain, or any other similar business, won’t be able to avoid the fallout from the coronavirus outbreak if the same level of footfall can’t be maintained in the coming months, as the economy starts to slow.

Index dividend schedule

Dividend payments from an index's constituent shares can affect your trading account. See this week's index dividend schedule

Selected UK & US company announcements

Monday 16 March Results

Ceres Power Holdings (UK) Q2

Dialight (UK) Full-year

FuelCell Energy (US) Q1

HealthEquity (US) Q4

InnerWorkings (US) Q4

Kindred Biosciences (US) Q4

New Age Beverages (US) Q4

Ring Energy (US) Q4

Tuesday 17 March Results

Addus HomeCare (US) Q4

Designer Brands (US) Q4

FedEx (US) Q3

Ferguson (UK) Half-year

Gamesys (UK) Full-year

Gamma Communications (UK) Full-year

Michaels (US) Q4

Polypipe (UK) Full-year

Smart Metering Systems (UK) Full-year

Smartsheet (US) Q4

Softcat (UK) Half-year

Tritax Big Box REIT (UK) Full-year

Vectura (UK) Full-year

Wednesday 18 March Results

accesso Technology (UK) Full-year

EMIS (UK) Full-year

Empiric Student Property (UK) Full-year

Pendragon (UK) Full-year

Tailored Brands (US) Q4

Tribal (UK) Full-year

Wm Morrison Supermarkets (UK) Full-year

Thursday 19 March Results

Darden Restaurants (US) Q3

Genel Energy (UK) Full-year

Global Eagle Entertainment (US) Q4

Gym (UK) Full-year

Lennar (US) Q1

OneSavings Bank (UK) Full-year

SafeStyle (UK) Full-year

Next (UK) Full-year

Friday 20 March Results

Hibbett Sports (US) Q4

Company announcements are subject to change. All the events listed above were correct at the time of writing.

 

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